United States District Court, District of Delaware
Presently before the court is Hybrid Tech Holdings, LLC's ("Hybrid") Emergency Motion for Leave to Appeal Decision Limiting Credit Bid. (D.I. 1.) For the reasons that follow, the court will deny Hybrid's motion.
At a public auction on October 11, 2013, Hybrid acquired the Department of Energy's ("DOE") $168 million interest in a secured loan previously extended by the Federal Financing Bank ("FFB") to Fisker Automotive Holdings, Inc. ("the Debtors"). (D.I. 1 at 1-2.) Hybrid won the auction with a bid of $25 million, (D.I. 2 at 3), and assumed the DOE's position as the Debtors' senior secured lender, (C.A. 13-13087-KG, D.I. 483 at 4). Having acquired the loan from the DOE, Hybrid entered into an Asset Purchase Agreement ("the Purchase Agreement") with the Debtors under which Hybrid was to acquire the Debtors' assets through a $75 million credit bid of the DOE loan. (D.I. 1 at 2, 7; C.A. 13-13087-KG, D.I. 483 at 4.) The Debtors filed the bankruptcy cases to accomplish the sale of substantially all of their assets to Hybrid and then to administer the chapter 11 estates through the Debtors' proposed chapter 11 plan of liquidation. (C.A. 13-13087-KG, D.I. 483 at 2.)
In December 2013, the Official Committee of Unsecured Creditors ("the Committee") was appointed. (D.I. 1 at 7.) The Debtors sought authorization from the Bankruptcy Court to consummate the sale to Hybrid, but the Committee opposed Hybrid's right to credit bid and proposed an auction instead. (D.I. 2 at 5-6; C.A. 13-13087-KG, D.I. 483 at 4.) Specifically, the Committee proposed an auction with Wanxiang America Corporation ("Wanxiang"), whose proposal was "extremely attractive both economically and in its significant non-economic terms." (C.A. 13-13087-KG, D.I. 483 at 5.) Wanxiang made it clear that if Hybrid was entitled to credit bid more than $25 million at the auction, Wanxiang would not participate in the auction. (Id. at 7.) In effect, there would not be an auction. (Id.) On January 10, 2014, the Bankruptcy Court held a hearing to consider whether the Debtors' assets should be sold through an auction, whether Hybrid was entitled to credit bid its claim, and whether Hybrid's credit bid should be capped at at the $25 million with which Hybrid won the DOE auction. (D.I. 1 at 9; C.A. 13-13087-KG, D.I. 483 at 7.) At the conclusion of the hearing, the Bankruptcy Court ruled from the bench that the Debtors' assets should be auctioned and that any credit bid by Hybrid should be capped at $25 million. (D.I. 2 at 9.)
On January 14, 2014, Hybrid filed a Notice of Appeal, among other things. (Id. at 9-10.) On January 17, 2014, the Bankruptcy Court heard oral argument on Hybrid's motion. (Id.) After the hearing, the Bankruptcy Court entered a written order again capping at $25 million Hybrid's ability to credit bid at any auction for the Debtors' assets. (Id. at 10.) While acknowledging that "[i]t is beyond peradventure that a secured creditor is entitled to credit bid" under 11 U.S.C. § 363(k), the Bankruptcy Court based its ruling on the fact that "[t]he law is equally clear, as Section 363(k) provides, that the Court may 'for cause order otherwise.'" (Id. at 8.) The Bankruptcy Court concluded for a few reasons detailed in its order that there was cause to cap at $25 million Hybrid's ability to credit bid. First, the Bankruptcy Court cited the certainty that Wanxiang would otherwise withdraw its attractive proposal and refuse to participate in an auction. (Id. at 9 ("The evidence in this case is express and unrebutted that there will be no bidding - not just the chilling of bidding - if the Court does not limit the credit bid.") (Emphasis in original).) Second, the Bankruptcy Court expressed concern regarding the consequences for other would-be bidders of Hybrid's rush to purchase all of the Debtors' assets, explaining that "Hybrid, if unchecked of its purchase, might well have frozen out other suitors for Fisker's assets." (Id. at 10.) Third, the Bankruptcy Court explained that "Hybrid's claim is partially secured, partially unsecured, and of uncertain status for the remainder....[and] [t]he law leaves no doubt that the holder of a lien the validity of which has not yet been determined, as here, may not bid its lien." (Id. at 10-11.)
In addition to differing in their assessments of the Bankruptcy Court's correctness in capping Hybrid's credit bid, Hybrid and the Committee also differ regarding whether the order of the Bankruptcy Court constitutes a final order appealable as of right pursuant to 28 U.S.C. § 158(a)(1) and Bankruptcy Rule 8001(a). Hybrid argues that the Bankruptcy Court's decision regarding the credit bid is a final order and that even if its appeal is interlocutory, the factors to be considered weigh in favor of its appeal being heard. (D.I. 1 at 1, 11.) The Committee argues, on the other hand, that the decision is not final for the purposes of appeal and that Hybrid "has failed to establish any of the elements necessary to justify this early appeal of a non-final decision." (D.I. 2atl.)
III. LEGAL STANDARD
A. Final Bankruptcy Court Orders
28 U.S.C. § 158(a)(1) provides that "a district court for the judicial district in which the bankruptcy judge is serving" has mandatory jurisdiction to hear appeals from "final judgments, orders, and decrees" of the bankruptcy judge. Although Section 158(a)(1) does not discuss what constitutes finality, Third Circuit precedent establishes some basic precepts. Some of the factors that the Third Circuit has considered in determining whether a Bankruptcy Court's decision is final include: "(1) 'the impact of the matter on the assets of the bankruptcy estate, ' (2) 'the preclusive effect of a decision on the merits, ' and (3) 'whether the interests of judicial economy will be furthered.'" In re Marcal Paper Mills, Inc., 650 F.3d 311, 314 (3d Cir. 2011) (quoting In re F/S Airlease II, Inc., 844 F.2d 99, 104 (3d Cir. 1988)). Additionally, district courts should be pragmatic in their interpretation of finality in bankruptcy cases because of the protracted nature of the proceedings and the numerous parties with different claims often involved. See, e.g., F/S Airlease 11, 844 F.2d at 104; In re Natale, 295 F.3d 375, 378 (3d Cir. 2002); In re White Beauty View, Inc., 841 F.2d 524, 526 (3d Cir. 1988). Despite this more "relaxed view of finality", however, "the general antipathy toward piecemeal appeals still prevails in individual adversary actions...[and] inefficient use of judicial resources is as objectionable in bankruptcy appeals as in other fields." Natale, 295 F.3d at 379. It is well established that "an order in an individual adversary proceeding is not final unless it 'ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.'" Bethel v. McAllister Bros., Inc., 81 F.3d 376, 381 (3d Cir. 1996) (Internal quotation and citation omitted). Accordingly, "even in bankruptcy appeals the concept of finality is not open-ended. Orders that do not fully adjudicate a specific adversary proceeding or that require further factual development are governed by the ordinary finality precepts of routine civil litigation." In re Truong, 513 F.3d 91, 94 (3d Cir. 2008) (quoting United States v. Nicolet, Inc., 857 F.2d 202, 206-07 (3d Cir. 1988)); see also In re Semcrude, LP, Civ. No. 10-447-SLR, 2010 U.S. Dist. LEXIS 136391, *10 (D. Del. Oct. 26, 2010) (concluding that the bankruptcy court's order was not final).
B. Interlocutory Orders
Where appeals are sought from bankruptcy judges' "interlocutory orders and decrees", it is entirely at district courts' discretion to grant or deny leave to appeal these orders. See 28 U.S.C. § 158(a)(3); In re Bertoli, 812 F.2d 136, 140 (3d Cir. 1987) (interpreting Section 158(a)(3) as permitting district courts to hear interlocutory appeals at their discretion). Section 158(a)(3) does not expound on how district courts are to decide whether to grant interlocutory appeals, but district courts usually apply the standard provided in 28 U.S.C. § 1292(b). See, e.g., In re Anderson News, LLC, Civ. No. 12-87-LPS, 2013 U.S. Dist. LEXIS 174895, *7 (D. Del. Dec. 10, 2013) (explaining that "[t]ypically, however, district courts follow the standards set forth under 28 U.S.C. § 1292(b), which govern interlocutory appeals from a district court to a court of appeals."). Section 1292(b) states that an interlocutory appeal should be heard when the court is "of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." Additionally, the appellant must establish that "exceptional circumstances justify a departure from the basic policy of postponing a review until after the entry of final judgment." See, e.g., Anderson News, 2013 U.S. Dist. LEXIS at *8 (citation omitted); In re Semcrude, LP, 2010 U.S. Dist. LEXIS 136391 at *10 (citation omitted).
A. Finality of the Bankruptcy Court's ...